Agencies seizing money from criminals should be allowed to seek better returns on the confiscated funds, the national auditor says.
While the Australian Financial Security Authority held about $270 million in money identified as proceeds of crime last year, laws stopped it from getting an improved rate of return, the Australian National Auditor's Office found.
Money confiscated from criminals is redistributed as funding for the Australian Federal Police and state police forces, and provides millions for crime prevention and safety programs.
The interest rate for AFSA bank accounts holding proceeds of crime has declined with the cash rate to 1.3 per cent.
The AFSA told the auditor, whose report was tabled in Parliament on Wednesday, that practical and legal constraints limited how the funds could be managed.
For money it took control of - or 'restrained' - during criminal matters, the agency had a limited mandate to invest funds to generate a return, ANAO said.
It needed authority from the Finance Minister to invest permanently confiscated funds.
"The Australian Government should implement arrangements to facilitate improved rates of returns from funds," the auditor said.
Proceeds of crime held in bank accounts by the AFSA, an agency within the Attorney-General's portfolio, grew by more than $150 million between 2012 and 2016.
Among confiscated bank balances totalling more than $100 000, money stayed in an AFSA-controlled interim account holding 'restrained money' for an average of 423 days before being transferred into its confiscated assets in 2015-16.
"In view of the significant growth in the funds being held in the relevant accounts in recent years and the length of time that funds are routinely held at least in the restrained monies account, it would be timely to implement revised administrative and legislative arrangements applying to the management of all of the accounts," the ANAO report said.
The Attorney-General's Department did not respond to questions by deadline, but it told the ANAO that the legislative framework did not "currently envisage the increasing of returns" under overarching policy objectives.
"However, the department will consult with government on this matter," it said.
